Binary options trading has been around for quite some time now. This concept of trading is popular among traders because it’s simple to understand, generates high return rates and can’t make traders lose more than they have initially invested. There isn’t an exact year that shows when binary options first appeared as a trading possibility, but it’s a well known fact that in 2007 the Options Clearing Commission recommended changes in this type of trading in order to make it available to wider public. A year later the SEC approved binary options trading as a tradable investment instrument and it quickly became a hit among traders.
How does trading with binary options work?
Binary options trading is a very interesting concept that offers only two possible outcomes of every trade; traders can either win a predetermined award or lose everything invested in the trade. Many people call binary options “yes” or “no” propositions because the trade usually is kind of a question that the trader answers with one of the two previously offered options. For example, a trader wanting to trade gold gets to answer whether the price of the gold will go above or below a particular line at a certain point of the day. If the answer is “yes” then the trader is buying and if the answer is “no” the trader is selling. Binary options trading features currency pairs, indices, stocks and commodities. However, unlike stock trading, users are not actually buying these assets, but simply speculate on the price movement. Also, traders with binary options can’t lose more than they have invested, which is not the case with Forex or stock trading.
What are the most important criteria for a good binary options broker?
Choosing a good binary options broker is a crucial step towards having a safe and pleasant trading experience. There are several criteria that have to be met by a binary options operator if traders want to be sure their information is protected, be able to claim bonuses and get refunds.
Not surprisingly, licensing and regulation are very important part of each binary options broker. Obtaining a licence by any reputable regulating body means that the broker has met all requirements regarding working policy, player funds insurance, site safety and etc. Therefore, it’s always recommended to stick to binary options brokers that hold a licence. There are many regulating bodies and each country has its own binary options regulator. Nevertheless, some of the most respected ones are CySec (Cyprus), BaFin (Germany), FCA (United Kingdom) and CFTC (United States).
Another thing every trader should pay attention to prior to joining an online binary options broker is how safe customers’ deposits and data are at the site. Naturally, nobody wants to find out that the funds they transferred are gone or that someone managed to steal their personal and financial information. Therefore, checking the privacy policy of a broker is extremely important. When it comes to safety of deposits, you should make sure that the broker is keeping all traders’ money on separate accounts from the company’s funds. Also, it’s important the money to be stored in a stable and reliable financial institution. That way, even if the operator faces financial problems your money will be safe and sound, waiting for you to withdraw them. Personal data, on the other hand, it’s highly preferred to be encrypted using the latest encryption technology. Additionally, make sure that the operator doesn’t share users’ information with third parties.
Returns and refunds are a great way of winning big or at least getting back a small percentage of the amount you’ve lost after an unsuccessful trade. Not all binary options brokers offer good return and refund rates and therefore it’s good to stick to the ones that do. Refund is usually described as a possibility to win a small amount of cash even when you lose. For example, there are operators that give you the option to open a trade with 70% payout and a 15% refund in a 85% profit rate. The refund rates are usually small and they vary from 5% to 20%. Return rate is the profit traders can make per a successful trade. These rates, depending on the broker, can be between 70% and 90%. Naturally, it’s advised to sign up with brokers that offer high return rates.
Traders at binary options trading sites are trading with assets or also referred to as underlying assets. Not surprisingly, not all brokers offer the same amount of these assets and thus at certain sites traders have a much better variety of assets in comparison to other brokers. It has to be pointed out that these assets can be commodities, currency pairs, indices and stocks. The richer the offer of assets is, the better. Traders should join brokers that offer them a wide selection of trading options because it’s always better to be able to trade with various assets. Usually, operators mostly tend to offer currency pairs and stocks. The number of these can be as low as 10 and go over 80. The number of commodities usually is between five and 15, while the number of indices varies from 20 to 40. Top binary options operators give their customers a chance to trade with over 100 assets at any given time.
Binary options trading is available only via an appropriate software, which was built for that purpose. Hence, it’s easy to conclude that the software is another important aspect of binary options brokers. What are the characteristics of a good binary options trading software? Well, first, it has to be safe and reliable. The software should run smoothly and it shouldn’t crash often. Some brokers have their own proprietary platform, while others use popular trading platforms such as SpotOption, Marketpulse and Tradologic. Whatever the case is, you’ll want to see high responsiveness, sleek running and generally stable software. Another thing that’s important is whether the platform supports mobile devices or not. Regardless whether a broker offers web app or native mobile apps, being able to access the trading platform anywhere and anytime puts you in an excellent position to never miss a good trading opportunity.
New binary options traders are usually lost when they first join a binary options broker. However, a good way of getting familiar with a particular trading platform and learn how binary options trading works is to sign up with an operator that provides demo accounts and learning materials. Demo accounts are, in fact, accounts that let you trade with free credits in real time, just like real money traders do. With their help, you can quickly test the platform, see whether it suits your needs and see how trades are opened at that site. Sometimes, brokers let you quickly access a demo account by entering your e-mail address only and sometimes you’ll be required to complete the full registration process. Learning materials, on the other hand, can include online courses, free webinars, e-books and guides that help beginners to understand the concept of binary options trading. The bigger the variety of learning materials is, the better.
In their pursuit of new customers, binary options brokers launch various generous bonus offers. These offers are a fantastic way to get a bankroll boost and win cash without investing a large amount of money. However, not all bonus offers are the same and thus you should carefully read the particular offer’s terms and conditions prior claiming it. There are different types of bonuses as well; for instance, the most common one is the welcome offer that is usually a match offer on players’ first deposit. These welcome bonuses can vary from 50% to 150% and the maximum bonus amount that can be received usually goes between $50 and $250. Sometimes brokers even offer no deposit bonuses i.e. they give new traders a small amount of free cash ($5-20) so they can experience real money trading without spending a dollar. Additionally, there might be reload bonus offers, special promotions and etc.
Even though customer support is featured the last on this list, it’s quite important to join an online binary options broker with a high quality support service. What traders should look for is a site that provides them with support 24 hours a day, seven days of the week because you never really know when you’ll need immediate assistance. Furthermore, it’s important to be able to get in touch with support representatives via various channels. Live chat and phone are the two preferred contact options that your chosen broker should offer, since e-mails usually take at least several hours to be answered.
Where are the differences of the various options?
Even though binary options trading is a single trading field, there are different types of trades that can be opened. The most basic type of options trading is high/low. This is the simplest trade anyone can open and it involves predicting whether the price of an asset would go up or down after the expiration of the contract. For example, a trader can open a trade at 13:00 that expires at 14:00 that the price of the gold will go up during that hour.
However, besides this type of options, there are also touch, range high/low, spread high/low and 60 second options. Touch options, in fact, can be further divided into one touch, no touch and double touch options. Unlike a simple guess whether the price will go up or down, these trades should predict the level the price will reach (touch) or not (no touch). Range high/low trades involve predicting whether the price will go up or down within a given range, while spread high/low is guessing will the price be below or above the price level offered by the company. Finally, 60 seconds options expire only after a minute and they’re allowing many trades to be made in a short period of time.
Are there successful strategies for trading with binary options?
In trading, there isn’t a perfect strategy that can make traders sure winners. However, there are certain strategies that proved positive on the long run and therefore traders might want to check them out. One such strategy is binary hedging, which is strongly forbidden by some brokers. Hedging is trading on one asset in opposite directions. This is actually a risk management strategy that makes sure you get back at least part of your loss. Binary options trading also has strategies based on betting models as well as strategies based on predicting the direction of the market. Experienced traders sometimes even tend to develop their own trading strategies in order to improve their chances of opening successful trades. Nevertheless, trading is always a risky activity and there aren’t any strategies that will help you open winning trades every single time.
Pros and Cons
Just like any other concept out there, binary options trading comes with pros and cons. Several positive aspects of binary options trading are the high returns in short time, simplicity, ease of execution and no fees or commissions. As we have already mentioned, binary options trading offers up to 90% returns, which is a truly amazing number. Plus, most binary options trading platforms are so easy to understand and use that even rookies can start opening trades in no time. Additionally, unlike Forex trading and CFD trading, binary options trading doesn’t come with fees or commissions. Also, one of the best things about binary options trading is the fact that you can’t lose more than you have invested.
Negative aspects of binary options trading, on the other hand, are high risk, odds that are usually in favour of the brokers and operators that are mainly in foreign jurisdictions. In any case, the high risk shouldn’t be a surprise to anyone since high payouts always come with a high risk rate. This doesn’t mean that you won’t be able to earn some cash, but it simply suggests that you should be aware you might lose money in the process.